Employers and staff in a business which is changing owner will find the process of the transfer easier, fairer and more effective through reforms announced today by Employment Relations Minister Jo Swinson.
When a business changes owner, its employees may be protected under the Transfer of Undertakings (Protection of Employment) Regulations (TUPE). TUPE protections make sure that employees don’t unfairly lose out when a transfer takes place, and set out the rules that the old and new businesses have to follow.
In a response to a consultation on TUPE regulations earlier this year, the government is announcing that the laws will be improved to make sure both employers and staff are treated fairly when a transfer takes place.
Employment Relations Minister Jo Swinson said:
TUPE rules are essential to making sure that when a business is transferred from one company to another, it happens in a fair and efficient way. There have been some areas of the law which created uncertainty and confusion for businesses trying to comply with the law.
By making these changes we will clear out the cobwebs in some of the rules which will give businesses more clarity about conducting transfers. As part of the Red Tape Challenge we are reforming these rules, keeping in place the necessary protections for employees and helping support a stronger economy.
In its response the government has confirmed that:
- businesses will be able to renegotiate terms and conditions provided for in collective agreements one year after the transfer provided that overall the change is no less favourable. TUPE protects employees’ terms and conditions and does not generally allow them to be changed by reason of the transfer. However, as an exception, the Acquired Rights Directive (which TUPE implements) gives scope for changes to terms and conditions, which are set out in collective agreements, from one year after the transfer
- it will make clear that where employees have terms and conditions provided for in collective agreements, only the terms and conditions in the collective agreement existing at the time of the transfer will apply to the employment with the new employer. Later changes to the collective agreement won’t bind the new employer if it is neither a party to the subsequent collective agreements, nor takes part in the process for bargaining them
- it will not repeal the service provision change rules. These rules mean that TUPE will usually apply to the change in the provision of a service, such as security guarding services for a business, where there is a group dedicated to the service for the client. The rules protect service sector workers, as they are more likely to move with the work during a change. Employees will continue to be protected as they have been
- it will provide clarification of the rules on service provision changes. The government will set out part of the test which determines whether there has been a service provision change. For a change to have happened, the activities carried on after the change must be ‘fundamentally or essentially the same’ as those carried on before it. This means that if businesses radically change the way they provide services, that change is unlikely to be caught by the TUPE regulations
- it will amend the rules so that where the place of work changes after the transfer, any redundancies due to that change will not be automatically unfair. This means that as a starting point businesses will not face possible unfair dismissal claims simply because of a change in location of the workplace
- that it will allow micro businesses to inform and consult employees directly when there is no recognised trade union or other existing representatives. At present when a business transfer takes place, under TUPE regulations businesses usually have to inform, and sometimes also consult, employee representatives such as trade unions representatives. For micro businesses of ten or fewer employees, there are often no representatives which means that they have to be elected. This change will make this process much less bureaucratic
The changes outlined will remove unnecessary gold plating to EU Law and reduce red tape. They will remove unfair legal risks from businesses and thereby increase their confidence and competitiveness without the shadow of legal worries hanging over them.
Simpler, more flexible employment laws will make it easier for companies to hire and manage staff, while protecting basic workers’ rights. This should encourage employers to create new jobs, supporting enterprise and growth.
The government intends that the new regulations will be laid in Parliament in December 2013.
Notes to editors
- The government response to the consultation on changes to the TUPE regulations can be found online.
Further changes include:
- amendments to the provisions which give protection against dismissal and restrict changes to contracts so that the wording of the rules more closely reflects the wording of the Directive and case law of the Court of Justice of the EU. This is to reduce the risk that the current wording is interpreted more widely in some cases than is required by the Directive
- a change to the specific requirement on the business transferring staff to disclose pre-transfer employee liability information. At present the rule is that this should usually be provided at least 14 days before a transfer. The government will retain these employee liability rules and extend the timeframe so new businesses will get this information at least 28 days before the transfer, strengthening a business’ ability to plan ahead and prepare for their new staff
- an employer proposing 20 or more redundancies may have an obligation to consult about the redundancies with employee representatives (this is often called ‘collective redundancy consultation’). Sometimes the new employer in a transfer situation may be proposing such redundancies following the transfer. Government will make an amendment to the legislation on this to provide that in certain circumstances, consultation about the redundancies which begins before the transfer takes place, can count for the purposes of the rules on collective redundancy consultation. This will provide certainty for business
Government is working to improve the guidance relating to TUPE so that it is updated, clearer and more useful to businesses undertaking a transfer.
Government will work closely within Europe to persuade other Member States of the benefits of a harmonisation framework, which, if agreed, could make is easier for businesses to match up the terms and conditions of new and old employees which a transfer has taken place.
The changes are part of the Employment Law Review, started by BIS in 2010 and ending in 2015. The review is looking at all employment laws to make sure they offer maximum flexibility for employers and employees. This should encourage employers to take on more staff, supporting enterprise and growth.
- The government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries’. It set four ambitions in the ‘Plan for Growth’, published at Budget 2011:
- to create the most competitive tax system in the G20
- to make the UK the best place in Europe to start, finance and grow a business
- to encourage investment and exports as a route to a more balanced economy
- to create a more educated workforce that is the most flexible in Europe
Work is underway across government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the government wants the economy to travel.